That wasn't a show, it was a clinic, so I could get inside the ring. At a competition, that would not be permitted. I used a Nikon D90 and a Nikon 85/1.8. At a show, you'd need something longer to get the same types of shots. (In addition to an 85/1.8, Canon also has a 100/2 at about the same price, plus a 135/2 that's a lot more expensive.) Either that, or do some cropping. The D90's 12MP images are excellent, but if you need the large aperture and can't get close, you may be able to get satisfactory results by croping the 15MP images from the Canon T1i or the 18MP images from the T2i.

Here's a topic I created of photos I took at another clinic in the same venue. It contains additional photos plus an explaination of what I had to do to get them: Cesar Parra Dressage Clinic 5/20

If the OP is serious about his budget then there's no way he can get any DSLR/lens, let alone a suitable one. In the Canon range the minimum I'd want to use for this is a T2i with a 70-200 f2.8 zoom lens, and needless to say this would utterly eclipse the budget. I'm not so familiar with the Nikon range, but I don't think I'd go below the new D7000, and even without a lens that's more than double the budget.

Unless the OP has greatly more money available than (s)he says, I would suggest an up-market compact, the one I have in mind being the Canon S95. Comfortably within the budget, it is capable of pretty good low-light pictures without flash. And it has a useful zoom range that would get him/her closer to the horses.

problem is the budget is $500 the canon 70-200 f2.8 is 4 times the budget without the camera body to go with it

realistically your looking at entry level cameras with good high iso performance and a consumer/kit telephoto lens and even that is pushing the budget - the pentax kx i thnk we can agree is not an expensive camera and yet from amazon with the 55-300mm telephoto zoom its coming in at $719 and not that much under budget just with the base 18-55mm

unless amazon prices in the us are not competative at all your really struggling with canon though the xs does just squeeze in

What is the OP experience in taking pictures, I can see from these posts that they may spend a lot of money on gear and then have a learning curve to get the right type of pictures for them to be acceptable. i would hate to see people spend a lot of money and then be very disappointed with the results.

well I"m not sure if this will help, but I take a few pictures at indoor arenas from time to time recently at AQHA in Columbus I took a picture of my neice with a sony a300 using the built in flash and about 200ft this is the picture I got with just a little brighting from software. Not the best but not bad and camera is in price range. I would recommend a external flash to help though